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3. Dual Agency

Case #189, Order on Consent - Matter of DOS v. L.A. Grant Realty - 60-day suspension; $1,000 fine

Opinion Letter 92-10 (Charles Young) - improper charge by managing agent to tenant

21 DOS 92 Matter of DOS v. ERA McGill Real Estate - improper dual agency role as seller's agent for real estate transaction and buyer's agent for mortgage; improper purchase of listing by affiliated licensee

26 DOS 92 Matter of DOS v. Lepkowski - improper purchase of listing by affiliated sales associate

Opinion Letter 92-41 (Iva Liebert) - "in-house waivers" are said to be improper (without citation of authority)

156 DOS 92 Matter of Gotshall - undisclosed dual agent for landlord and subtenant

Opinion Letter 92-49 (Shirani B. Ponnambalam) - broker offering services to facilitate mortgage prepayment must ensure full disclosure and informed consent, citing declaratory rulings on mortgage brokers: Declaratory Ruling 90-16 (Matter of Kane, et al.), Declaratory Ruling 90-20 (Matter of First Security Financial Services) and Declaratory Ruling 91-8 (Matter of Roemer & Featherstonhaugh)

86 DOS 93 Matter of DOS v. Winograd - undisclosed dual agent for tenant and subtenant; failure to provide copy of sublease violates 19 NYCRR §175.1; no suspension of broker who has no knowledge at time of event or retention of proceeds, but liability for own misconduct; refund unearned commission

63 DOS 93 Matter of Carpio d/b/a Dentone Realty - broker acts as dual agent without informed consent; advises that attorney is not needed and commits unauthorized practice of law; alteration of document and improper notarization; forfeiture of right to commission due to breach of fiduciary duty

128 DOS 93 Matter of DOS v. Vuksanaj - motion to conform pleadings to proof granted where (i) additional evidence wouldn't have been presented if the charge had been stated in the complaint and (ii) issue was actually litigated and was within the "broad framework of the pleadings"; broker's authorization to execute lease on behalf of landlord must be in writing to be valid (G.O.L. §5-703); no commission earned on void lease (due to lack of written authority for broker to sign for landlord); broker is undisclosed "double agent" - thus "fails to make clear" for which party he is acting (175.7); broker is not "managing agent" under NYC Rent Stabilization Code unless (i) broker has ownership or financial interest in property or (ii) performs managerial duties; separate escrow account (§175.1) not required when broker is not holding escrowed funds; holding funds overnight does not trigger requirement for escrow account (returned next day upon demand); unlicensed name used in commission agreement but lack of intent to mislead considered in mitigation; restitution of unearned commission

152 DOS 93 Matter of DOS v. Baird - individually licensed broker improperly conducts business under unlicensed name; failure to file termination of associate card; complaint amended to conform to the proof; failure of proof of dual agency

1 DOS 94 Matter of ERA Faza Realty - DOS is not divested of jurisdiction by voluntary surrender of license or expiration of license if action occurred while licensed, while an applicant for a license, or while eligible to automatically renew per RPL §441(2); requirement of informed consent to dual agency; concealment, misrepresentation and failure in seeking to purchase for own account (2 transactions arranged - sale to licensee and resale at profit to customer, who was qualified for mortgage, but who seller was told had failed to qualify); disgorge profit and commission; fee not related to performance of legitimate service; representative broker must be corporate officer and is vicariously liable for wrongful act of associated salesperson under RPL §442-c; restitutionnot attributed to corporate broker where no proof that funds illegally obtained were collected by or in any way benefitted the corporation; DOS has no power to assess damages; representative broker not required to supervise another representative broker and not liable for misconduct of another representative broker who meets test of RPL §442-c; complaint dismissed as to other representative broker

CRC #304 Matter of DOS v. Gregory, Consent Order - dual agency; failure to resign agency when licensee purchase for own account; illegal commission; restitution and two-month suspension

CRC #469 Matter of DOS v. Lynn Emmerling, Consent Order - dual agent without full disclosure and informed consent; restitution of $841.25; fine of $3,500

CRC #469 Matter of DOS v. Craig Emmerling, Consent Order - dual agent without full disclosure and informed consent; restitution of $841.25; fine of $1,500

CRC #469 Matter of DOS v. Rowley, Consent Order - dual agent without full disclosure and informed consent; restitution of $3,776.59; fine of $500

CRC #309 Matter of DOS v. Chatterton, Consent Order - dual agent with full disclosure and informed consent; fine of $500

3 DOS 95 Matter of Tucci - licensee as partner in entity selling property to builder does not come within 19 NYCRR §175.6; dual agency found where licensee represents seller in real estate transaction and serves as mortgage broker for buyer; failure to make agency relationships clear violates 19 NYCRR §175.7; pre-hearing and post-hearing motions; restitution of $1,081; fine of $1,000; DOS determination vacated by stipulation of settlement; non-admission, restitution of earned mortgage broker fee

12 DOS 95 Matter of Morse - respondents' testimony which is inconsistent with documentary evidence is rejected in its entirety; salesperson failed to advise tenant of landlord's credit verification requests, causing them to lose half of their deposits; dual agency without informed consent not established, as licensee signature in space for landlord's was only intended to show who the broker was in the transaction; no failure to make escrow deposit where tenant knew money was to be delivered to landlord; failure of tenant's agent to advise of material information that in delivering deposit to landlord the tenant might lose money; use of unlicensed name; vicarious liability of broker for salesperson misconduct, broker may be fined even in absence of knowledge of salesperson's misconduct; restitution required of broker

14 DOS 95 Matter of Myers - broker who assists buyer in obtaining mortgage on other property to facilitate down payment is agent of buyer; broker is seller's agent in purchase transaction; as buyer's agent, depositing of down payment in his operating account violates 19 NYCRR §175.1; as seller's agent, depositing in operating account does not violate 19 NYCRR §175.1; conversion of deposits, but no proof of grand larceny as no proof to permanently deprive; fraudulent practices in failing to forward deposit; where only commission is for mortgage, no proof of unearned commission; vicarious liability of corporate licensee for acts of representative broker; restitution of money to which not entitled, with interest

24 DOS 95 Matter of Seplow - disciplinary charge jurisdiction where licensee's renewal has been previously denied; proof of service of process; agency relationship and duties; fraud in sale of cooperative apartment, including false information about particular sale and willful non-disclosure of material information; failure to obey buyer's obvious intent to have deposit treated as funds to be held in escrow as payments to seller; conversion; rules applicable to supplemental pleadings - absent surprise or prejudice, motion to file and serve could be granted on day of hearing, but here respondent doesn't appear, so supplemental complaint dismissed without prejudice; DOS fails its burden of proof as to extortion and retention of unlawful commission and unauthorized practice of law; when respondent became optionee to purchase subject matter, agency relationship ceased to exist; fiduciary duty precludes respondent from acting simultaneously as agent and principal in a transaction; restitution of $35,000 deposit plus interest at legal rate for judgments

Opinion Letter June 8, 1995 (Richard Lipsman) - Broker/landlord may represent the prospective tenant and earn commission on apartment rental of broker's own apartment and act as dual agent if the informed consent of the prospective tenant is secured

75 DOS 95 Matter of DOS v. Vigilant Capital Corp., et al. - dual agency; vicarious liability; independent contractor; evidence; affirmative duty on broker to supervise associated salesperson - cannot be independent contractor; behavioral nexus between parties established agency relationship - acting as mortgage broker for buyer and real estate broker for seller; failure to disclose dual agency; vicarious liability requires actual knowledge or ratification by either directly or indirectly or retained proceeds; proof of agreements; include DOS investigators reports where no personal knowledge; consumer's complaint is not probative evidence until they testify

73 DOS 95 Matter of DOS v. Marotta - consolidation of actions; dual agency; disgorgement of broker commission; broker may act concurrently in a single transaction as an agent and a principal with informed consent of and full disclosure to principal; broker's agreement breached by broker where broker obtained property incompatible with client's stated needs; no broker's fee earned where brokerage agreement breached by broker; broker engaging in business under trade name acts as individual; agency created between broker and buyer by conduct of parties; dual agency allowed upon full disclosure and informed consent of both buyer and seller; no commission earned by broker where breach of fiduciary duty; refund unearned commissions

Consent Order 95-0479, Matter of DOS v. Heckman - Acting as dual agent in regulated transaction without the informed consent of both principals; failure to cooperate with investigation; misleading DOS investigation; $1,000.00 fine and three (3) months suspension

Consent Order 96-0676, Matter of DOS v. Szukala, et al. - acting as dual agent in regulated transaction without the informed consent of principals; salesperson, broker representative and corporate broker fined $1,000 each

139 DOS 96, Matter of DOS v. Toppin - burden of proof; dual agency; disclosure of agency relationships; licensee’s purchase of property; DOS has the burden to prove, by substantial evidence, the allegations in the complaint; licensee advised seller that he was a real estate salesperson at first contact; knowledge by seller’s attorney, acting as seller’s agent, of licensee’s license status is imputed to seller; salesperson’s broker may act as agent of the seller in the same transaction where salesperson is purchasing property; agency is a consensual relationship, therefore, agent cannot be bound as an agent without its consent; complaint dismissed

160 DOS 96, Matter of DOS v. Werner - dual agency; vicarious liability; dependent transactions; unauthorized practice of law; violation of Reg. 175.24 by minor variations in language is de minimus; failure to provide RPL §443 disclosure to seller before entering into listing agreement demonstrates incompetency; representation of buyer and seller in separate but interrelated transactions consists of dual agency and requires informed consent of the parties after full and fair disclosure; licensee did not engage in unauthorized practice of law where contract used did not contain an attorney’s approval clause and was not recommended by a joint bar/Realtors committee where contract was completed by licensee at instruction of buyer’s attorney, licensee instructed seller to consult their attorney and final contract was the product of negotiations between the parties’ attorneys; failure to advise principal when entering into agency agreement of office policy not to co-broker properties for the first 30 days of the listing was a breach of agent’s fiduciary duties; commissions are unearned where agent breaches its fiduciary duties to principal; broker admonished to use exact language of Reg. 175.24 and to use sales contracts containing an attorney’s approval clause; broker fined $2,000.00 and required to disgorge commissions of $7,100.00 plus interest; two salespersons each find $1,000.00

80 DOS 97 Matter of DOS v. Robin - laches; reliance on attorney advise; mortgage applications; real estate brokers license needed to negotiate loan on unimproved property; mortgage broker license only applies to residential mortgage loans; disclosure of ownership interests; dual agency; disclosure of agency relationships; bankruptcy; to establish defense of laches, respondent must show substantial prejudice arising out of the delay such that the delay significantly and irreparably handicapped it in preparing a defense; reliance on attorney advise is a valid defense and may relieve respondent of liability; DOS has jurisdiction to review licensee’s conduct for untrustworthiness or incompetency even when not acting in licensed capacity; Reg. 175.7 requires a broker to make it clear for which party he is acting; licensee may act as a dual agent only upon full and fair disclosure and with the informed consent of the parties; it is not necessary that there be a showing of injury or actual fraud for a finding of improper conduct regarding dual agency so long as the licensee fails to obtain the principals informed consent; licensee may act as agent and principal in same transaction on disclosing all relevant facts to principal; broker may be required to return monies, with interest, where broker was not entitled thereto; discharge of broker’s debts in bankruptcy prevents DOS from ordering refund, however, DOS may impose other sanctions; corporate broker is responsible for acts of its representative broker within actual or apparent scope of authority; sanctions cannot be applied against entity no longer licensed, which has been unlicensed for more than two years and has no automatic right of renewal; individual broker’s license suspended for 6 months

247 DOS 97 Matter of DOS v. Abreu Realty - dual agency; deposits; fraudulent practice; vicarious liability; broker illegally acted as dual agent without full disclosure and informed consent of buyer and seller in a regulated real estate transaction; broker required to maintain separate, special bank account for the deposit of escrow funds (19 NYCRR 175.1); broker commingles client funds; refusal to return escrow funds constitutes larceny; illegal exercise of right of ownership over principal’s funds is conversion; broker’s failure to establish escrow account, commingling of client funds and illegal retention of escrow monies constitutes fraudulent practice; corporate broker is vicariously liable for the acts of a corporate officer where there is actual knowledge of the misconduct and after notice thereof, the corporate broker retains the benefits, profits and proceeds of the transaction; revocation of corporate broker’s license and representative broker’s license

293 DOS 97 Matter of Fox - proof of qualifying experience; applicant fails to establish that he has obtained 1,750 points pursuant to 19 NYCRR Part 179; salesperson is required to retain written records of his activities and to submit such records with his application for a license as a real estate broker; applicant fails to submit any documents substantiating experience; application for broker’s license denied

294 DOS 97 Matter of DOS v. Greene - proof of qualifying experience; material misstatement on application; failure to cooperate with DOS investigation; RPL §441(3)(a) applies to all renewal applications for a real estate license for any license period commencing after November 1, 1995; applicant incorrectly stated on renewal application that he had completed required continuing education course as he mistakenly believed that a real estate computer course satisfied the statutory requirement; DOS fails to prove licensee refused or failed to cooperate with an investigation as it fails to prove licensee had actual or implied knowledge of DOS’s requests; applicant failed to comply with the continuing education requirements of RPL §441(3)(a); salesperson’s license revoked

297 DOS 97 Matter of DOS v. Bzdel - proof of qualifying experience; cooperation with DOS investigation; applicant for license renewal technically violated RPL §442(3)(a) by failing to complete the mandated education requirement prior to licensure renewal; applicant did not make material misstatement on application and cooperated with investigations; technical violation of RPL §442(3)(a) where violation was not intentional and purpose of the law was not circumvented where real estate salesperson did not engage in real estate activities during period of renewal and prior to completion of continuing education requirement; mitigating factors where applicant did not work as a real estate salesperson because of her son’s illness (lead poisoning), her husband was terminated from his job, and applicant’s future employment is uncertain because of recently diagnosed brain tumor; applicant reprimanded

307 DOS 97 Matter of DOS v. Richards - proof of qualifying experience; material misstatement on application;applicant violates RPL §442-e(5) for failure to cooperate with DOS investigation; DOS fails to establish applicant’s failure to comply with continuing education requirement as a result of applicant’s failure to cooperate in answering DOS questions or appearing at hearings; fact that applicant may have been wrongfully licensed for a substantial period of time is taken into consideration in determining penalty; salesperson’s license suspended until such time as proof is submitted that applicant satisfactorily completed the requisite approved continuing education courses; in the event applicant had not completed continuing education requirements timely, license further suspended for a period of time equal to the amount of time prior to the issuance of order of suspension that applicant was improperly licensed plus two months

316 DOS 97 Matter of DOS v. Anderson - proof of qualifying experience; failure to cooperate with DOS investigation; due process; failure to appear at hearing; hearing may proceed ex parte where there is proof of proper notice of hearing; applicant fails to complete the required continuing education course; applicant’s refusal or failure to submit requested materials constitutes violation to cooperate (RPL §442-e(5)) where licensee has knowledge (actual or implied) of DOS’s request and refuses or fails to comply; DOS fails to prove respondent had actual or implied notice of DOS’s requests; salesperson’s license revoked

CRC #97-1363 Matter of DOS v. Fudge, Consent Order - acting as dual agent without full disclosure to the parties; $500 fine; $650 restitution

370 DOS 97 Matter of DOS v. Schepard - proof of qualifying experience; due process; failure to appear at hearing; license renewal issued notwithstanding that licensee indicated in renewal application and audit letter that she had not completed the mandatory education requirements; salesperson’s license revoked, decision rendered without prejudice to subsequent application for licensure upon compliance with educational standard requirements

40 DOS 98 Matter of DOS v. Ferguson - due process; failure to appear at hearing; proof of qualifying experience; cooperation with DOS investigation; DOS fails its burden of proof; ex parte hearing is permissible upon proof of proper notice of hearing; licensee fails to cooperate with DOS investigation where she only partially responds to audit letter and fails to respond to letter requesting appearance to establish continuing education requirements; DOS fails its burden of proof where licensee fails to appear at requested meeting and fails to appear at hearing; license of real estate salesperson suspended until submission of proof of completion of approved continuing education course and further suspension for a period of time equal to amount of time when improperly licensed plus two months

43 DOS 98 Matter of DOS v. Meehan - due process; failure to appear at hearing; proof of qualifying experience; DOS fails its burden of proof; cooperation with DOS investigation; ex parte hearing is permissible upon proof of proper notice of hearing; licensee fails to cooperate with DOS investigation when fails or refuses to respond to audit letter and fails or refuses to respond to letter requesting conference to establish continuing education requirements; DOS fails its burden of proof to establish non-compliance with continuing education requirements where licensee fails to respond to audit letter and fails to attend conference to establish continuing education requirements; real estate salesperson’s license is suspended until licensee presents proof of compliance with continuing education requirement

2 DOS 99 Matter of DOS v. Moore - disclosure of agency relationships; dual agency; fraudulent practice; unearned commission; vicarious liability; broker fails to provide agency relationship disclosure form to prospective buyer at time of first substantive contact; broker fails to make it clear for which party he is acting; broker agrees to provide the prospective buyer with an appraisal thereby becoming buyer’s agent while representing seller; broker uses information received from one client for the benefit of another client to the detriment of the first; failure to deal honesty with the public; claiming and bringing suit for an unearned commission is a demonstration of untrustworthiness; broker knew he was not entitled to commission where offer submitted was never signed by seller and aware of prior full price offer; broker engaged in dual agency without informed consent of the principals; fraudulent practice where broker misused information obtained for the benefit of one client to the other client’s detriment; DOS fails its burden of proof to establish that broker acted improperly by not advising sellers of risks in accepting or failing to accept any competing offers; corporate broker vicariously liable for acts committed by its representative broker within actual or apparent scope of authority; revocation of corporate and representative broker’s licenses

27 DOS 99 Matter of DOS v. Finke - fraudulent practice; dual agency; unearned commission; broker became principal and agent in same transaction when broker agreed to be co-mortgagee on a first mortgage on sale of seller client’s property; broker fails to make proper disclosures regarding implications of his acting as both agent and principal in the same transaction; broker fails to disclose material information to the seller client regarding adverse financial condition of purchaser; broker engaged in fraudulent practice by placing his interests (as first mortgagee) ahead of those of his seller client, when he failed to advise his client that his prior advice that client’s second mortgage could be sold was inaccurate; misconduct so changed the transaction as to eliminate any entitlement to commission; broker’s license is suspended for six months plus further suspension until broker submits proof of refund of $3,500.00 commission plus interest

CRC #99-0126 Matter of DOS v. Harris, Consent Order - failing to deposit security deposit in escrow account violates 19 NYCRR §175.1; failure to inform principal that broker received foreclosure proceedings and that tenant had vacated the property constitutes breach of fiduciary duty of full disclosure; failure to immediately deposit monies into escrow account; breach of fiduciary duty of undivided loyalty by becoming a dual agent without proper disclosure and informed consent of the parties; $1,500.00 fine and restitution in the amount of $613.00

CRC #99-1581 Matter of DOS v. Genovese, Consent Order - dual agency; broker, acting as dual agent for S and B-1, prepared and had the parties execute a contract for sale - - contract was not disapproved in writing by either parties’ attorney - - thereafter broker, acting as dual agent for S and B-2, prepared another contract of sale for the same property without making the second contract subject to or contingent upon the first contract of sale with B-1; $1,000.00 fine

CRC #00-0429 Matter of DOS v. Greene (Lawrence), Consent Order - dual agency; broker acted as an undisclosed dual agent in a regulated real estate transaction; $350.00 fine

CRC #00-1546 Matter of DOS v. Naber, Consent Order - disclosure of agency relationships; dual agency; broker failed to provide written agency disclosure and acted as an undisclosed dual agent; $250.00 fine and restitution in the amount of $537.50

1 DOS 03 DOS v. McLean-Rich – disclosure of agency relationships; dual agency; sellers executed a dual agency statement and will not be excused from the executed dual agency statement where sellers complain that the faxed dual agency statement was illegible and the legal import of the statement was not understood where sellers do not allege fraud, duress, mistake or undue influence; real estate broker acting as a dual agent has the duty to act with fairness to and with consideration for the interests of each principal; dual agent has the duty not to disclose to one principal confidential information given to the agent by the other principal; after the termination of the fiduciary agency relationship, the broker does not have a subsisting duty to the sellers of non-disclosure of confidential information where buyers, as parties in a civil suit against the sellers, used the affidavits of the associate real estate brokers to the benefit of the buyers in the civil suit; associate broker demonstrated incompetency where she improperly listed property as “sale pending” when there was neither a valid, enforceable contract nor a mutual agreement between the sellers and buyers in existence regarding the property; associate broker to pay $1,000 fine

228 DOS 03 DOS v. Tucci – disclosure of agency relationships; dual agency; unauthorized practice of law; vicarious liability; fiduciary agency relationship was created both between the broker and the landlord and between the broker and the tenant; broker fails to provide agency disclosure form to tenant at any time during the employment; broker failed to make it clear to both parties that he was acting as an agent for both parties in violation of 19 NYCRR §175.7; broker engaged in the unauthorized practice of law by preparing a lease agreement; broker’s preparation of lease agreement appears to have been done as a service to the landlord and prospective tenant and not with the intention to circumvent either licensing law or judiciary law; fiduciary obligation of confidentiality continues after the termination of the fiduciary relationship; broker did not breach his duty of confidentiality by providing an affidavit in a civil suit between the landlord and tenant where the information provided was not confidential; broker’s co-partner is vicariously liable for the wrongful acts of the other co-partner committed within the scope of the partnership business as Partnership Law §24 prescribes that all parties are liable, jointly and severally, for the wrongful acts or omissions of the other co-partner committed within the scope of the partnership business; $2,500 fine

399 DOS 03 DOS v. Samaroo – disclosure of agency relationships; dual agency; broker fails to provide agency disclosure form to seller prior to entering into listing agreement; DOS fails to prove that broker acted as an improperly disclosed dual agent where evidence shows that buyers produced by broker were his sister and her husband but does not establish that broker was acting as the buyer’s agent; $1,000 fine

741 DOS 03 DOS v. Mi Casa II Realty Corp. - accounting to client; deposits; disclosure of agency relationship; dual agency; broker failed to discuss or execute agency disclosure forms with client; broker represented both landlord and tenant in a regulated, real estate transaction acting as an undisclosed dual agent; broker deposited security deposit into his operating account, commingling trust funds; broker committed an act of conversion by using principle’s trust funds without principle’s knowledge or consent; broker failed to deliver security deposit to principal; broker breached fiduciary duty to account to client; broker ordered to refund $725.00 security deposit and $700.00 commission and ordered to pay $500.00 fine

772 DOS 03 DOS v. Home General Realty Corp. - accounting to client; deposits; disclosure of agency relationships; dual agency; DOS fails its burden of proof; DOS fails to prove broker acted as an undisclosed dual agent and that broker failed to cooperate with DOS investigation where numerous written demands were not delivered to broker and were returned to DOS; broker failed to present to and obtain a signed agency disclosure form from its principles; broker failed to maintain an escrow account; broker deposited trust funds into its operating account; broker gave deposits to a “mortgage loan officer” without verifying the individual’s identity and business status; broker was unable to obtain return of monies paid to “mortgage loan officer”; broker ordered to refund $26,391.00

1895 DOS 07 Matter of Veksler- unlicensed corporation; deposits; disclosure form; dual agents; fraud; failure to maintain records; forgery; revocation

472 DOS 08 Matter of Abdullah – salesperson, forging of client name on §443 form; misrepresentation in activity as dual agent; revocation and restitution of $3,625 plus interest if ever reapply

619 DOS 09 Matter of Miller – failure to provide agency disclosure; undisclosed dual agency; self-dealing; breach of fiduciary duties; commission claim from other than broker; failure to supervise; complaint dismissed

958 DOS 09 Matter of Cabrera – agency disclosure; unlicensed name; relocation of office without approval; failure to cooperate; unearned commission; $2,000 fine and refund of $1,800 plus interest

960 DOS 09 Matter of Moore – salesperson; unlicensed activity without knowledge of broker; agency disclosure; unearned commission; failure to satisfy judgment; revocation; no relicensure unless pay $530 judgment with interest

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